Marketable Securities

3 Months Ended

Apr. 01, 2017

Marketable Securities [Abstract]

Marketable Securities

(3)  Marketable Securities

The Company’s marketable securities are all classified as available-for-sale within “Current Assets” in the Company’s Consolidated Balance Sheets.  FASB has established three levels of inputs that may be used to measure fair value:

Level 1  Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2  Observable inputs, other than Level 1 inputs in active markets, that are observable either directly or indirectly; and

Level 3  Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company’s marketable securities valued using Level 1 inputs include highly liquid equity securities, for which quoted market prices are available.  The Company’s municipal bond portfolio is valued using Level 2 inputs.  The Company’s municipal bonds are valued using a combination of pricing for similar securities, recently executed transactions, cash flow models with yield curves and other pricing models utilizing observable inputs, which are considered Level 2 inputs.

For Level 2 investment valuation, the Company utilizes standard pricing procedures of its investment advisory firm(s) which include various third party pricing services.  These procedures also require specific price monitoring practices as well as pricing review reports, valuation oversight and pricing challenge procedures to maintain the most accurate representation of investment fair market value. 

The Company accrues interest on its bond portfolio throughout the life of each bond held.  Dividends from the equity securities are recognized as received.  Both interest and dividends are recognized in “Investment income and interest expense” on the Company’s Consolidated Statements of Income.  Investment income was $1.1 million and $637 thousand for the first quarter of 2017 and 2016, respectively.

Marketable securities, as of April 1, 2017 and December 31, 2016, consisted of:

			Gross		Gross
(dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
April 1, 2017	Cost		Holding Gains		Holding Losses		Value
Available-for-sale:
Level 1
Equity securities	$	1,198	$	7,804	$	-	$	9,002
Level 2
Municipal bonds		54,773		784		(280)		55,277
	$	55,971	$	8,588	$	(280)	$	64,279

			Gross		Gross
(dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
December 31, 2016	Cost		Holding Gains		Holding Losses		Value
Available-for-sale:
Level 1
Equity securities	$	1,198	$	8,162	$	-	$	9,360
Level 2
Municipal bonds		57,739		531		(459)		57,811
	$	58,937	$	8,693	$	(459)	$	67,171

Maturities of marketable securities classified as available-for-sale at April 1, 2017, were as follows:

		Amortized		Fair
(dollars in thousands)		Cost		Value
Available-for-sale:
Due within one year	$	7,623	$	7,667
Due after one year through five years		24,811		25,161
Due after five years through ten years		22,339		22,449
Equity securities		1,198		9,002
	$	55,971	$	64,279

(3)  Marketable Securities (continued)

The Company also maintains a non-qualified supplemental executive retirement plan and a non-qualified pharmacist deferred compensation plan for certain of its associates which allows them to defer income to future periods.  Participants in the plans earn a return on their deferrals based on mutual fund investments.  The Company chooses to invest in the underlying mutual fund investments to offset the liability associated with the non-qualified deferred compensation plans.  Such investments are reported on the Company’s Consolidated Balance Sheet as “SERP investment,” are classified as trading securities and are measured at fair value using Level 1 inputs with gains and losses included in “Investment income and interest expense” on the Company’s Consolidated Statements of Income.  The changes in the underlying liability to the associates are recorded in “Operating, general and administrative expenses.”